Country note: Thailand
In Short
By Alexander Friis Illum, Senior Analyst
We visited Bangkok in late November 2024 to meet with government officials, central bankers, and local analysts. Decades of political uncertainty, marked by military coups and frequent changes in government, have hindered structural reforms and investments in key industries. While the political landscape appears to have stabilized for now, offering the government an opportunity to adopt a longer-term focus, the impact of ongoing initiatives, such as the Eastern Economic Corridor project, remains to be seen. At the same time, the government continues to prioritize short-term measures like cash handouts, which are contributing to a worsening fiscal situation. We believe Developments in Thailand in 2025 will likely depend heavily on how the government manages risks related to the changing US administration.
Politics: Uncertainty persists
For an IG-rated country with a long history of solid growth, fiscal prudence, and low, stable inflation, Thailand has experienced significant political uncertainty over the past decades. The two military coups in 2006 and 2014 stand out as the most critical events, highlighting underlying instability.
More recently, in August 2024, the Constitutional Court first ruled to dissolve the Move Forward Party, which had won the most seats in the previous year’s general elections. Just a few days later, a separate ruling from the Constitutional Court removed then Prime Minister Srettha Thavisin from office on the grounds of an ethics violation. Early thereafter, Paetongtarn Shinawatra, daughter of former Prime Minister, Thaksin Shinawatra, was chosen as the next Prime Minister.
For now, it appears we are in a relatively stable situation. Shinawatra seems to have prioritized policy continuity, with the initiation of the THB 10,000 handout program notably improving her popularity among the population. However, the ruling coalition consists of 11 parties, making it challenging to establish a consensus on crucial structural reforms. While stability seems to prevail at the moment, such a broad coalition means that renewed instability could arise quickly and without warning.
Decades of political uncertainty and frequent leadership changes have led various governments to prioritize short-term "popular" measures over structural reforms. Given the rapidly deteriorating demographic outlook (see chart 1 below), productivity- enhancing initiatives are crucial. The ongoing Eastern Economic Corridor (EEC) infrastructure project exemplifies necessary investments, but more action is needed to boost long-term productivity. We encouraged Ministry of Finance (MoF) officials to focus on education reforms, an area they approached with an open mind despite its political challenges in Thailand, where teachers represent a large and influential voter group but show little appetite for change.
Chart 1: Old age dependency ratio incl. UN forecasts
Note: The UN defines the old age dependency ratio as the number of people aged +65 divided by the number of people aged 15-64 Source: UN, Haver Analytics, Global Evolution
With regard to foreign policy, the main area of attention is the incoming US administration. Thailand is an open economy with trade (exports + imports) accounting for around 135% of total GDP. Tariffs and rising trade protectionism would undeniably pose challenges to the economic outlook. However, Thailand's position in the middle of supply chains would likely make tariffs less impactful than in some neighboring countries. Our analysis suggests that Thailand is unlikely to be hit harder than most other Asian economies by US policies.
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